Sean Callow, analyst at Westpac, notes that the AUD/NZD cross has declined almost without interruption from late Jan to late March, reaching lows since Sep 2016 (ex-flash crash).
Key Quotes
“The RBA’s formal switch from a mild tightening bias to a more balanced outlook on the cash rate produced a step lower in the cross, though the net change in AU-NZ yield spreads was not significant in this time.”
“The trend was only interrupted by the RBNZ’s unexpected flip from neutral to an easing bias, even after a decent New Zealand Q4 GDP report. Near term, we expect the kiwi to remain undermined by the impression that every RBNZ meeting is now “live” for a rate cut. Indeed Westpac now expects a cut on 8 May.”
“The RBA meanwhile, appears on track to deliver a rate cut in August (Westpac’s base case), with pricing for a move before then likely to be moderate as the RBA Board takes time to reassess what is still officially a bullish Australian growth outlook.”
“In coming weeks, markets should focus on the prospect of the RBNZ cutting rates before the RBA, helping AUD/NZD push to above 1.06. Relative commodity prices continue to imply significantly higher trading ranges for AUD/NZD.”
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